China faces important negotiations on the yuan in the coming weeks, said U.S. Ambassador Jon Huntsman, who added that Washington is not alone in his wish that Beijing stop tying its currency to the dollar as it has since 20 months ago .
"We hope to see more flexibility on the exchange rate," said Huntsman told an audience of students at Tsinghua University in Beijing.
"The cheating would be if left with the impression that this is a very, very important in America and what will remain. See what happens in the coming weeks," he added.
The currency debate has become acrimonious in recent days after U.S. lawmakers demanded that 130 sanctions against China unless the Asian giant raises what they see as an unfair competitive advantage and appreciate its currency.
A U.S. Treasury semiannual report due in mid-April could label China as "currency manipulator", which would add pressure on Beijing and are threatening to deepen the rift between the largest and third largest economies in the world.
"I suspect there will be many important negotiations in the coming weeks. This is of real concern for the citizens of my country," Huntsman said.
He declined to elaborate on the nature of the talks but said the U.S. was not alone in its desire for a stronger yuan.
China's currency has remained frozen at around 6.83 per dollar since mid-2008, to help its exporters to face the global credit crisis.
"My Chinese friends like to make this just a U.S. problem. I would say there are many countries that feel the same," he said.
A Japanese Vice Minister of Finance told the press that China should understand the global appeals for a more flexible yuan, but it would be "incorrect" Washington to resort to sanctions to pressure.
"I do not know if the U.S. imposed sanctions, but did not think it's the right way to confront it," said Yoshihiko Noda.
"Basically, it's not a desirable measure. But I want China to understand that there are expectations of a more flexible yuan, not only in America", he added, reiterating that Japan and other Asian neighbors also want a flexible yuan, he said, beneficial for the world and also China.
Dominique Strauss-Kahn, managing director of International Monetary Fund said on Wednesday that the vision of the fund was that the yuan was undervalued.
Unfair and harmful
Chinese officials have not given an opportunity for discussion, saying that will not waver in maintaining its exchange rate stable while asserted that his country is being used as scapegoat for one's problems in the United States before the election this year .
Qin Gang, spokesman of Chinese Foreign Ministry said the U.S. demands for a higher yuan were unfair and harmful to China-US relations.
Resolve trade frictions "requires both sides to be calm and rational," said Qin.
A stronger yuan would mean the end of many Chinese exporters in sectors such as labor-intensive clothing and furniture, said a semiofficial trade group.
"If the yuan rises, these companies face the immediate risk of going bankrupt because their margins are already very close," said Zhang Wei, vice chairman of China Council for the Promotion of International Trade.
"As for these companies, the consequences would be disastrous," he said.
Although external pressure on China to raise the yuan is intense domestic pressure to maintain low currency is even higher, said Zhang, who said his group is consulting over 1,000 exporters would probably face a higher rate .
Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong, said the stress tests were an indication that, despite its official rhetoric, Beijing was paving the way for what could be a revaluation of 5 to 10 percent yuan in the next quarter.
Several offices of the Chinese Government, including ministries of Trade and Industry, similar stress tests conducted last month.
(Additional reporting by Eadie Chen in Beijing, written by Alan Wheatley)
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